New Delhi, November 29
The Comptroller and Auditor General (CAG) today rapped the Ministry of Defence, the Army, the Indian Air Force and the Defence Research and Development Organisation (DRDO) for committing financial irregularities.

The CAG tabled two reports in Parliament today. It criticised the Army for letting a private builder usurp prime land in Mumbai by giving it “an irregular no-objection certificate”.

“Certain fraudulent activities regarding the piece of land had come to notice. However, the Central Ordnance Depot (COD), Mumbai, did not get the land demarcated in its favour from state authorities,” the CAG said. The 5,166-sq m piece of land usurped by a private builder in Kandivali, Mumbai, had been in the possession of the Army since 1942.

The Army headquarters instead of investigating and defending its case allowed the builder to go ahead with its development work. The CAG has suggested to the CBI, which is already probing the case, to find out as to how the NOC was issued when the COD had objected to the construction of any multi-story building in the vicinity.

The CAG has also picked holes in the Defence Ministry policy to promote military industry in the country by questioning waivers given to foreign defence firms for fulfilling their offset requirements. Under the “offsets policy”, foreign vendors bagging deals worth over Rs 300 crore have to invest at least 30 per cent worth of the deal back in Indian defence, homeland security or the civilian aerospace sectors.

The monitoring mechanism of the MoD was “ineffective as it was created without a clear definition of its objectives and role. It has remained only a paper exercise”, it said. In some cases, the Indian “offsets partners” were actually 100 per cent owned subsidiaries of the foreign vendor, it said.

The CAG said the Boeing proposal to set up a test facility at the DRDO was an investment in kind. “Even as it was not an eligible offset...it was accepted by the
Defence Acquisition Council (DAC) and approval in principle for setting up the facility has also been accorded by the CCS,” it said.

The DAC had maintained that investment in kind through non-equity route was not permissible for “offset”. The CAG report said a scrutiny of five offset contracts showed that equipment involving Rs 3,410 crore was being directly provided by the foreign vendor in kind without any value addition.

The CAG has also pulled up the DRDO. It committed “procedural irregularities” by taking up new projects and splitting sanctions for them to bring it within financial powers of the organisation head.

The CAG said the financial powers of the Director General, DRDO, and the Secretary, Defence Research and Development, were enhanced from Rs 25 crore to 50 crore and Rs 60 crore to 75 crore, respectively, and both these offices were held by one person only.

On the splitting of sanctions, it said, “Sanctions were spilt to bring them within the delegated financial powers of the DG, R and D, (DRDO chief) that is up to Rs 50 crore in consultation with the Integrated Financial Adviser.”

The CAG noted that in some cases, the cost of DRDO projects was brought down below Rs 50 crore by reducing the number of deliverables and curtailing its scope enabling the DG, DRDO, to issue sanction within his delegated powers.

THE FINDINGS

The Defence Ministry policy promoted military industry in the country by allowing waivers to foreign defence firms for fulfilling their offset requirements

The Army let a private builder usurp prime land in Mumbai by giving it “an irregular no-objection certificate”

The DRDO committed “procedural irregularities” by taking up new projects and splitting sanctions for them to bring it within financial powers of the organisation head